Pest Control Contracts -- Or No Contracts?
One of the questions that I see pop up very frequently is whether or not pest control companies should require annual agreements or just go month-to-month. Initially, I was skittish about pushing an agreement, now I feel like they are in everyone’s best interest. You are doing yourself and your customers a big disservice if you don’t utilize contracts.
What is a contract?
If your goal in a contract is to force people into a service they don’t want, then you’ve probably got bigger problems. A great friend of mine (who also happens to be a hot-shot lawyer) once told me that the purpose of any contract is to define the relationship between two parties and to clarify what happens when things don’t go according to plan. Many times two individuals enter into a partnership and think they are both on the same page about how things will go; when in reality they each have completely different expectations. An agreement helps ensure that both you as a company as well as the customer know what to expect, what is covered, what the limitations are, and what happens when things go wrong. This way, there are no hard feelings or resentment from misaligned expectations.
Long term growth
It is almost impossible to grow consistently with sporadic or one-time customers. Without having the ability to forecast and plan where you will be over the next 3, 6, and 12 months, you will not be able to grow efficiently or consistently. I have seen many owners go out of business because they couldn’t accurately predict what their workload/revenue would be over time. You may think you are doing your customers a favor by not utilizing agreements, but how can you help customers if you can't predict the number of techs/office staff you need to hire, or even whether or not you will still be in business!? Also, by the way, if you ever plan to sell your business, having customers under contract drastically improves your valuation.
What should your pest control agreements address?
Scope of work: Be sure to clearly identify what your service does and does not cover. Flying insects, termites, second-story wasps nests? What about carpenter ants or grubs? Often customers have unrealistic expectations about what is considered a covered pest. Make sure both you and the customer are on the same page about the difference between controlling pests and never seeing an insect.
Retreatments: How often will you return for free to treat stubborn issues – once per quarter, twice? What if the customer calls you every time they see a lone ant? What if the customer has trash lying around the floor and unsealed food in the kitchen? If you set the proper expectations up front, your customer will know you are committed to solving issues while also understanding that pest control is a cooperative effort, which sometimes takes time.
Agreement length: One of the most difficult parts of owning your own business is uncertainty. Uncertainty about how much work you will have doesn’t just add stress to your life – it adds cost! You need to be able to forecast how much work you will have over the next 3, 6, and 12 months in order to properly hire and train needed staff. In addition, it is EXPENSIVE to get a new customer; so retaining a loyal customer saves you real dollars. By entering into an agreement with customers, they get better service, better pricing, and guaranteed work.
Cancellation terms: What happens if things don’t work out? This will inevitably happen and when it does, there needs to be a protocol. If you have no cancellation fee, then all of the benefits we mentioned above come out of your own pocket and you really didn’t have an agreement with the customer at all. You have a responsibility to protect your company and employees. If your cancellation fee is too high, it can be unreasonable to the customer and they may not pay anything at all – or even worse, slander your good name. Find a cancellation fee that is fair to both you and the customer, knowing that this will happen from time to time for reasons both reasonable and not. What about moving out of your service area, sick family, financial troubles. Be specific.
State regulations: Don’t forget to check with your state about specific terms or language that must be present. Fines for neglecting these items can ruin your business!
While I used to struggle with pushing contracts on customers, I know realize that it is a benefit to both of us. At the end of the day, we are all trying to provide a valuable service to people who have a need -- and contracts help us to do that. Don't kill yourself doing one-time services which have low residual or recurring value -- take advantage of agreements!